Standing Committee A

[Mr. Peter Atkinson in the Chair]

State Pension Credit Bill [Lords]

New clause 2 - Fraud

'The Secretary of State shall as soon as practicable after the end of the fiscal year 2004–05 and as soon as practicable after the end of each year thereafter lay before Parliament a report setting out— 
 (a) the extent of fraud in state pension credit claims; and 
 (b) the measures he has taken to deal with fraudulent claims for state pension credit.'.—[Mr. Clappison.]
 Brought up, and read the First time. 
 Question proposed [this day], That the clause be read a Second time. 
 Question again proposed.

James Clappison: I was about to bring my remarks to a close before we adjourned for lunch. I was talking about individual learning accounts, about which my hon. Friend the Member for Daventry (Mr. Boswell) memorably asked the Deputy Prime Minister at Prime Minister's questions. The lesson that we must learn from the problems that arose with ILAs is that there is no room for complacency. If we do not scrutinise such provisions with the right degree of rigour, a great deal of fraud may suddenly come to light. That is what happened with ILAs, which had to be precipitately withdrawn.
 Having highlighted the dangers that we face, I should say that I am grateful to the Minister for his remarks. As in other areas, we shall hold the Government to account as regards fraud. On that basis, I beg to ask leave to withdraw the motion. 
 Motion and clause, by leave, withdrawn.

New clause 4 - Self-employed

'The Secretary of State shall as soon as practicable after the end of the fiscal year 200405 and as soon as practicable after the end of each fiscal year thereafter lay before Parliament a report setting out the number of self-employed persons entitled to— 
 (a) the guarantee credit alone; 
 (b) the guarantee credit and the savings credit; and 
 (c) the savings credit alone.'.—[Mr. Clappison.]
 Brought up, and read the First time.

James Clappison: I beg to move, That the clause be read a Second time.
 New clause 4 is about pension provision for the self-employed and how they fare under the state pension credit. As a result of evidence that it received during its investigation, the Select Committee on Work and Pensions directed its attention to this subject. In its memorandum to that Committee, the Association of British Insurers categorised the position of the self-
 employed as an anomaly within the pension credit proposals. The Association said: 
''One of the stated aims of Government pension policy is to ensure that all pensioners share in rising prosperity. The current system manifestly fails to ensure that this is the case for the self-employed. The Pension Credit proposals will extend this inequitable situation. ABI urges Government to grasp this nettle and address the issue of pension provision for the self-employed. We endorse the recommendations put forward by the Pension Provision Group, namely that the self-employed, as a group, ought to be brought into the State Second Pension (S2P). Doing so would allow all self-employed persons to benefit from S2P—thereby enabling them to gain access to the savings credit element of the Pension Credit.''
 That submission quotes the Pension Provision Group. In its December 2001 report, the group concluded that excluding the self-employed from the state second pension when it moved to being a flat-rate pension would further increase the gap between pension provision for employees and the self-employed. The group, which examined precisely that question, said: 
''Last November the Government published its outline Pension Credit proposals, and we decided we should take the opportunity to review this report in the light of them. Our view is that Pension Credit, as proposed then, and in the absence of our recommendations in this report, would further widen the pensions gap between employees and those in self-employment.''
 At the time that the report was published, the Government said in a written parliamentary answer: 
''We also welcome the group's report on pension provision and self-employment. It makes a useful contribution to the debate on this important issue.''—[Official Report, 19 December 2001; Vol. 377, c. 384W.]
 Apparently, it was a useful contribution in December 2001, but it does not seem to have got much further. In a later reply, to my hon. Friend the Member for Havant (Mr. Willetts), the Minister said: 
''As with SERPS, self-employed people cannot join the State Second Pension because they do not pay class 1 national insurance contributions.''—[Official Report, 20 March 2002; Vol. 382, c. 429.]
 That is right; the self-employed do not pay class 1 contributions, but they do pay class 2 and class 4 contributions. Although their national insurance liability remains below that of employees who pay class 1 contributions, self-employed persons above the lowest rung of earnings pay ever more in combined class 2 and class 4 contributions. Their liability has increased significantly because of changes that the Government have already made. Indeed, that is something of an understatement, given that those on moderate incomes have seen a whacking increase in their contributions,; even before we take into account the effects of the Budget that was unveiled last week. 
 According to figures supplied by the House of Commons Library, if we take into account class 2 and class 4 contributions, the national insurance liability of a self-employed person earning £30,000 a year has increased from £1,350 in 1997–98 to £1,881 in 2002—a £531 increase. Those are the figures up to this year, but when the Budget takes effect, the same person will be a further £253 worse off. The liability of a self-employed person earning £30,000 a year will, therefore, have risen £784 since 1997; from £1,350 to £2,134. 
 The increase in contributions at higher levels of income is even more dramatic. The national insurance liability of a self-employed person earning £50,000 a 
 year, for example, will have increased by more than £1,000 since 1997 because of the Budget and earlier changes. Indeed, the Budget means that contributions for self-employed people at every level of income will increase over the levels for 1997 and 2002. 
 Many self-employed people have seen whacking increases in their national insurance contributions. According to the Association of British Insurers and the Pension Provision Group, however, the Government are offering such people nothing in return; beyond their entitlement to the basic state pension, they have been excluded from the Government's plans. To put it mildly, many may feel a sense of grievance about their contributions. I need hardly remind the Committee that a substantial number of our constituents are self-employed; there are more than 3 million self-employed people in the country. They form one of the most productive and important groups in the economy and often provide vital services. 
 In his Budget statement, the Chancellor said that he wanted people to move from employment to self-employment and that he wanted to ease the transition for those who sought to do so. However, the Government's pension plans and the whacking increase in national insurance contributions do little to help the self-employed. We need only consider some of the facts that the Pension Provision Group provides about the self-employed to see why it is so important that we consider the Bill's implications for them. 
 Over the past 20 years, self-employment has grown, become more diverse and expanded into new, non-traditional occupations, while contracting in others. More people now move between self-employment and employee status. The growth of dependent self-employment and subcontracting means that work previously done by employees is now done by self-employed people. There are ever more self-employed people, and ever more of our constituents are moving between self-employment and employment. 
 Those facts led the Pension Provision Group to conclude that the distinction between employed and self-employed people in state pension provision was outdated. The group's analysis of the pension situation of the self-employed leaves, at the very least, a large question mark as to whether all self-employed people make appropriate provision for their retirement. The group found that self-employment increased the risk of retiring on a very low income, particularly for those working in personal services, and that: 
''Those with experience of self-employment tended to retire later than their employee counterparts and were more likely to work beyond state pension age. This partly reflected a desire (and ability) to continue working, but also in some cases a financial need to do so.''
 Those interesting conclusions were submitted to the Select Committee in the course of its inquiry in relation to the Bill about how the self-employed would fare under the proposals. It is important to raise the issue, because the position of the self-employed seems, in some respects, to have been overlooked in the proposals; that is the view, at 
 least, of authoritative groups commenting on the proposals, as well, possibly, as that of the self-employed. A representative of the Federation of Small Businesses described the self-employed in this context as ''a forgotten army''. 
 We shall try to remember them. We raise the subject in order to ventilate it and look forward to hearing from the Minister what the Government's response is to this, to the important submissions that were made to the Select Committee and to our concerns about how self-employed people will fare under the proposals.

Steve Webb: I support a good deal of what the hon. Member for Hertsmere (Mr. Clappison) said. It is important that the Conservatives have raised the issue of the self-employed, whose pension provision is often neglected. I shared his near-despair at the Minister's written answer in response to the Pension Provision Group that it was a useful contribution to the debate; that is the worst brush-off that one can imagine. That contribution does not seem to have informed policy since. The distinction between employed and self-employed is much less clear-cut—

Ian McCartney: I do not want to interrupt the hon. Gentleman's train of thought. However, before he gets too despairing, it was the Government that set up the Pension Provision Group. We are not afraid of debate, of looking for alternatives or of developing blue-sky policies. The hon. Gentleman would not have had the report if the Government had not established the group.

Steve Webb: It is to the Government's credit to set up a group if they are prepared to listen to its conclusions. If they entirely ignore its conclusions, I am not sure that that is to their credit; in fact one could argue that the money should not have been spent on it.
 I should like to expand on a point made by the hon. Member for Hertsmere about the two kinds of self-employment. Traditionally, the assumption has been that pension provision is less of an issue for the self-employed person with a business that will provide their pension—although that might not turn out well—or who can make their own private provision. However, the new self-employed might not have a business with assets; if they move between employment and self-employment, treating them as a group distinct from employees is a less tenable position than ever. As the hon. Gentleman suggests, crediting them into the state second pension, thereby encouraging them to save, would be a good thing to do. 
 I differ from the hon. Member for Hertsmere in what that should imply for the national insurance contributions made by the self-employed. When we compare them with the employed, we tend to forget the national insurance contributions of employers; the combined contribution represents a 20 per cent. rate per worker, whereas a self-employed person currently only pays 7 per cent. plus the class 2 contribution. The Treasury has estimated that the gap between the benefits received by the self-employed in retirement pension and the contributions that they make is substantial; possibly as much as £2 billion. 
 This might sound odd, and not very pro-business, but in some ways the self-employed have historically under-paid national insurance relative to the benefits that they get from the system. Although they receive less than employees, they do not receive much less—essentially sickness benefits—but they pay less than half the amount of national insurance; so they actually get a substantial subsidy. If they were to be brought into the state second pension, there would be a case for looking at whether there should be a compensating rise in national insurance.

James Clappison: I agree with the hon. Gentleman that we need to look at the whole issue. However, does he not agree that while that might have been the case in the past, the gap between what the self-employed pay in national insurance contributions and what employed people pay, not taking into account the employers' contribution, is closing?

Steve Webb: Only to a point, in that I do not disregard the employer. Clearly an individual makes a choice to become an employee with an employer who effectively knocks the 10 per cent. off his wages. In a sense, the employee is paying the combined amount, so there might be some convergence. However, I would still argue that the difference between 7 per cent. class 4 and 20 per cent. class 1 in terms of employee plus employer is hugely relative to the difference in benefit. While I agree that the state second pension should be the province of the self-employed, there might need to be an offsetting national insurance rise. However, the new clause is quite proper. It is important that the Government respond to concerns about the pension position of the self-employed and I welcome the opportunity to debate it this afternoon.

Andrew Selous: I support the new clause. My hon. Friend the Member for Hertsmere has given a good summary of the findings of the Select Committee so I shall not tire the Committee by repeating them.
 The Budget that was presented last week in the House was promoted on the two themes of fairness and enterprise. We know that the Government intend all pensioners to benefit from these provisions, so it is curious that some 1.4 million people will not have as full a benefit as they possibly might receive under the Bill. In terms of enterprise, we know that it is self-employed people who form the small businesses that go on to become larger businesses and create the wealth of the nation. 
 Work patterns are changing, as has been said. The Government have pushed out the boundaries of those who will be covered by S2P, and those within S2P are not just those who were formerly within SERPS; there has been some change. Given that the Government have looked at the area afresh and that this is a major revisiting of pensions legislation, I have to register a note of disappointment that an opportunity has been missed. Because of the 1.4 million people who will not be brought within S2P and who will gain significantly less benefit from the savings credit part of S2P, I commend the clause to the Committee.

Patrick Mercer: I support new clause 4, particularly as a veteran of the forgotten army of the self-employed. Having been a member at one stage, I know the difficulties; I am only pleased that I am no longer one and am back in Her Majesty's employment. It is a delight so to be.
 I should like to draw attention to the report proposed in the new clause. It would set out ways in which the self-employed can be monitored. The measures would allow for the monitoring of the effectiveness of pension credit in providing support to those who have been self-employed throughout their working lives. Should it prove to be ineffective in supporting such people, it would offer a signal as to the need for reappraisal. 
 As we have already heard from my hon. Friend the Member for Hertsmere—in a much more eloquent way than I can put it—self-employment expanded rapidly during the 1980s. In 1981, the total number of people who were self-employed was about 2 million; roughly 8 per cent. of those in employment. By 1991, the total had risen to 3.4 million, 13 per cent. of those in employment. During the 1990s, that expansion slowed, so that in 1999 3.2 million, 12 per cent. of those in employment, were self-employed. Experience of self-employment in the UK has become much more widespread over the last 20 years. 
 One implication of that development is that self-employment now represents a more significant factor in the provision people need to make for retirement. I believe that the new clause would allow that to be monitored in detail. A study by Knight and Mackay was cited by the Pension Provision Group in its recent report on pension provision for the self-employed. It estimated how significant the impact of changing patterns of employment would be on men and women reaching retirement age in the next 15 to 20 years. It suggested that at least 28 per cent. of men aged between 40 and 49 in 1994-95 will have spent some time in self-employment by the time they retire—I am one of those—compared with 20 per cent. of men who are now at about state pension age. 
 The significance of those figures is realised when examined in the context of patterns of pension provision, particularly the levels of pension developed by the self-employed. In 1998, the Pension Provision Group found that one in 10 self-employed people had a personal pension to which contributions had been made in the past but which were no longer being made, but that some 40 per cent. of self-employed people had never had a personal pension. 
 The group also suggested that there were indications that a number of self-employed people may be failing to build up a qualifying record for the basic state pension each year. Although some of those people may overlap with the, approximately, half of self-employed people who are not building up rights to a second-tier pension, the group concluded that it seemed reasonable to assume that a significant minority of self-employed people do not build up any pension entitlement in a given year. 
 Under the pension credit provisions, second-tier pension provision in the form of the state second 
 pension will attract a savings credit. However, according to the Pension Provision Group, the effect of that will 
''not only widen the gap between state pension rights earned in self-employment and those earned as an employee, but also the minimum underpin will be substantially higher for retired employees than for those retiring with histories of self-employment''.
 The group suggests that a small proportion of self-employed people will be able to fund their retirement by selling business assets or through other savings. For many, however, that option will simply not be feasible, and the result will be an increased risk of poverty in old age. 
 I believe that the provisions of new clause 4 will allow us to monitor that. It may serve as a useful signal as to whether pension credit is being effective for the self-employed.

Julian Brazier: I congratulate my hon. Friend the Member for Hertsmere on initiating an excellent debate and my hon. Friends the Members for South-West Bedfordshire (Andrew Selous) and for Newark (Patrick Mercer) on their contributions. The hon. Member for Northavon (Mr. Webb), the Liberal Democrat spokesman, contributed to an interesting exchange.
 I should declare an interest, in that my wife works part-time in a self-employed capacity. 
 I shall take as my starting point the interchange between the hon. Member for Northavon and my hon. Friend the Member for Hertsmere, because it seemed to go to the heart of an increasingly complicated and important debate. The question is how do we compare chalk and cheese; that is, the individual self-employed person's national insurance rate, which now stands at 7 per cent., and the rate paid by the employee, who contributes a little more, at 10 per cent., but whose employer also makes a large contribution. 
 In thinking about why we need to study the matter carefully, as suggested in the new clause, by producing figures regularly, I believe that we can look at the question in a slightly different way. Every year, the incentives increase for companies to shed employees and replace them with self-employed full-time or part-time consultants. Indeed, that is what happened to my wife. She now works for only two days a week; she is self-employed, and replaces a full-time former employee. For the sake of any feminists sitting on the Government Benches, she is replacing a man. [Interruption.] I heard the Minister's sedentary interruption; I shall not comment on it. [Interruption.] I feel provoked, Mr. Atkinson, but I shall merely observe that my wife sells far more business each month than the full-time chap that she has replaced. 
 A slightly different way of looking at the comparison is this. The incentives to replace full-time employees in that way are increasing. Every time the employers' national insurance contribution rate rises, it increases the incentive not to employ people and to find self-employed people instead. Every time a fresh piece of labour legislation is introduced that provides 
 extra rights for workers, another disincentive is created. Every time—

Peter Atkinson: Order. The hon. Gentleman is straying rather wide of the new clause, which relates to pensions for the self-employed.

Julian Brazier: I understand that entirely.
 As two of my hon. Friends have already remarked, the net result is that a growing proportion of people are self-employed. The catch is this. Where does it leave the self-employed if the Government continue, through a range of measures that I will not list again, trying the Committee's patience, to provide incentives for employers to ensure that the proportion of self-employed people in the total work force goes up each year, while self-employed individuals find that they are making almost the same contributions—7 per cent. compared with 10 per cent.—and providing more than two thirds of the contribution of their employee counterparts? Where does that leave those people, who will not be part of the great new pensions future that is allegedly unfolding before us in the Bill? It will leave us with a two-tier economy. 
 The statistics quoted by my hon. Friend the Member for South-West Bedfordshire a moment ago were chilling. They showed that some 40 per cent. of self-employed people had made no contribution, but the saddest statistic was that 10 per cent. had tried, but had now stopped making contributions. That is why the new clause is necessary. We must have a system to monitor what is going on in the self-employed sector. The Government say that their measures are designed to provide better pension prospects, but if that sector, which is growing fastest in the market, is left out of the picture, the provisions will be unfair in the long run.

Ian McCartney: Good afternoon, Mr. Atkinson.
 I want to take this matter at a leisurely pace because I think that, in moving the amendment, the hon. Member for Hertsmere intended to probe the issues surrounding the self-employed, rather than the issue of reporting to Parliament in a specific way. He tried to work us up into a frenzy by suggesting that the state system of contributions ignores the contribution of the self-employed to the economy and treats them in a shabby way. Let us get the basics right first before we move on to discuss the wider issues about the self-employed, because the picture that has been painted falls a long way short of the truth. 
 At present, the self-employed pay class 2 and class 4 contributions. Even allowing for the fact that the self-employed do not currently build up rights in SERPS or the state second pension, they are—there is no way around it—in effect, subsidised by other employees, who pay class 1 national insurance contributions at a rate of 10 per cent. for the employee and 11.9 per cent. for the employer at current rates. That ensures that the self-employed receive broadly the same benefits. The hon. Member for Northavon made that point without prompting. 
 The principal exceptions are SERPS, the state second pension and contributory jobseeker's allowance. Despite paying much less than national insurance contributions, it is estimated that the 
 subsidy amounted to £2.5 billion in 2001–02 alone. In moving the amendment, the hon. Member for Hertsmere was not initiating a general discussion. He made it absolutely clear that the Conservative party had a particular policy. I am not ridiculing him for making that statement, but he made a clear announcement on policy that has significant implications for the public purse, but he has not indicated whether his reform would preserve, extend or remove the subsidy. He gives no idea of how contributions would be made. Even allowing for what he said about a year-on increase and the levels of class 2 and class 4 contributions, the truth is that a huge subsidy would be involved in those contributions to the state. The hon. Gentleman has given no indication of how he would intend to pay for the effects of the amendment. 
 This is an example of a Conservative Member currying favour and saying that he is doing something for the self-employed. If that is what the Conservatives want to do, why did they not do it during all their reforms of employment law and national insurance? They had nearly 20 years to do something about it. 
 Some 2 million people pay only class 2 self-employed contributions. Some 50 per cent. of self-employed aged over 20 contribute to some form of non-state pension, but that masks the fact that the proportion of full-time employees who contribute to forms of non-state pension is 69 per cent. With part-time employees, the figure is 38 per cent., so the figure for the self-employed is higher than that for part-time employees, but significantly lower than the contribution for full-time employees. 
 The hon. Member for South-West Bedfordshire said that 1.4 million people were left out, but they are people who have made deficient basic state pension contributions. However, they qualify for the minimum income guarantee. They are not excluded in the purist sense intended by the hon. Gentleman, but he makes a fair point, because we need to develop a strategy for the years to come. 
 During last week's debate, I referred to monitoring. It is inconceivable that we would not want to monitor and publish information on the impact of pension credit on recipients. I have offered to discuss with the Committee the reporting arrangements that we shall put in place, but I cannot provide the required information for the new clause. We shall be able to publish information about the number of people receiving different elements of pension credit but, as with MIG, it will not be possible to determine how many have been self-employed at some time during their working life. 
 Pension provision for the self-employed has been the subject of a complex debate for some time, and the hon. Member for Hertsmere emphasised some of the comments and policy attitudes of a range of organisations and individuals. Some have said that people who have been self-employed will be disadvantaged in relation to pension credit entitlement, especially in comparison with those who were employed all their lives, because SERPS and the 
 state second pension will count for the purpose of the savings credit. It has been suggested that the self-employed should be included in the state second pension. 
 The Government attach importance to pensioners having a decent secure income on retirement. The state second pension and pension credit are crucial steps towards achieving that end. Indeed, the state second pension will for the first time cover 40 million low-paid workers, 2 million carers who do not build up contributions and 2 million people with disabilities who have intermittent work records. They are the types of employees left out of the original compromise on SERPS. All pension programmes are a compromise, and the SERPS compromise left out a large number of people of low earning and low capacity for earning. Although it was a wonderful scheme for those who could earn, it exacerbated the problem at the bottom. The purpose of redesigning the state second pension is to design out that flaw in SERPS, so it is important that the state second pension is a success. 
 Of course, large numbers of self-employed save for their retirement with personal pensions, often by investing in their own businesses. The hon. Gentleman is right in saying that the traditional image of the self-employed person has changed dramatically. The changes started in the late '70s and continued through the '80s and '90s. The change in the structure of labour market relationships has led to a change in the type of person who is self-employed. It is no longer just a question of a family working in a corner shop, or a small business such as a garage. The group is far more complex and diverse. The lower end of the income range of the group is also very diverse. 
 There is no such thing as a typical self-employed person. The category contains people who are semi-skilled, skilled, who have intermittent work records, who work with an employer, in the construction industry, at term time or on a seasonal basis. There are huge variations in the degree of access to the employment market for people who are generally called self-employed. It is not easy to create a contributory system that all self-employed people can or would wish to enter into.

Julian Brazier: By explaining how things are getting more and more complicated, the Minister is making a strong case for the new clause, which is basically about providing fixed information. To take him back to his original point, he challenged us to produce a policy on the measure. However, he is merely illustrating one more area in which the Bill is failing a whole section of society in encouraging people to save, and so on. Self-employed people will, as he has observed, enjoy MIG, but they will not become part of the new self-help culture that the Minister claims that the Bill espouses.

Ian McCartney: I did not challenge the hon. Gentleman to produce a policy. I believe that I congratulated him on his policy announcement. I wanted him to tell the Committee what would happen to the £2.5 billion subsidy. Would he continue it, extend it or remove it—where is the financial framework to meet the requirements of this newly announced policy? There is silence on that, of course.
 I have been trying to establish that there is some common ground here on the nature of the self-employed—the complex issues that I was talking about before the intervention of the hon. Member for Canterbury. The subsets of the main group of self-employed people have not been properly catered for in terms of pension policy. However, they are notoriously difficult to identify, target and engage in Government initiatives. Some want to participate and some do not. That is particularly true in terms of any financial implication in relation to themselves. 
 Some people in academia and politics say every self-employed person must be advised to enter the state second pension. When one asks how one goes about that, what the cost to the individual and to the state would be and how it would impact on all the other people making a contribution, there is a strange silence. There is silence for two reasons. It is a question not just of the complexity but of the politics of the matter. None of them wants to tell the truth—that there may be a financial implication for the self-employed as well. If there are no policy changes in this area there may be a financial implication for the funding structure. Nobody has yet got a policy to deal with that. 
 We held consultations on the possibility of including self-employed people in the second state pension in the 1998 Green Paper ''Partnerships in Pensions''. No clear way emerged from those consultations, but as with all new benefits, we are prepared to review the scheme and the question of whether to include the self-employed. Self-employed people who have no second pension can still gain from the guarantee credit. They will have less income taken into account in the income assessment. 
 We are committed to monitoring and evaluating the situation. We are committed to considering, at a later date, the issues around the self-employed. However, when it finally comes to making them those decisions will be hard. We shall then see whether or not the hon. Member for Hertsmere and his colleagues are still with the Government, or whether it is a bit of an airy-fairy thing for them, a nod and a wink to the self-employed, saying, ''We want to do something for you,'' but when it comes to the mechanics and they add up the costs, they will not be prepared to tell them what their contribution is likely to be. That is why, although he supported the hon. Gentleman, the hon. Member for Northavon made clear that there was a cost to it. He did not offer his unconditional support; he fudged around it because he wants us to offer him a free lunch on the new clause. I am not prepared to give him a free lunch. 
 Let us debate what we need to do for the self-employed. The Government are committed to the self-employed, and we need to look at how we can enhance pension provision for them. However, our decisions will have to be made in the context of what I said in my opening remarks. 
 I know that I am not going to convince the hon. Member for Hertsmere. I shall wait to see whether he withdraws new clause 4 or puts it to a vote, but the 
 Committee can rest assured that the Government are committed to the self-employed and we want to do what we can in relation to those policies. In saying that, I am being absolutely honest with Opposition Members about where we are in the debate. I have no doubt that the hon. Gentleman will want to return to the matter on the Floor of the House.

James Clappison: We have had an interesting and useful debate. I am grateful for the contributions made by my hon. Friends, and for the comments of the hon. Member for Northavon.
 I congratulate the Minister on his response, not least on his ingenuity. He made heroic efforts to construe the debate as a policy announcement. It was a nice try, but I assure him that when we have a policy on the subject he will know about it. He was helpful—[Interruption.] Before he intervenes, I would gently remind him of what he said earlier. He said that the pension provision group that I cited was set up by the Government. It is rather rich that Ministers, when reminded of what their groups have said, should accuse the Opposition of making up policy.

Ian McCartney: I cannot let the hon. Gentleman get away with that. It is one thing to set up a group, and one can accept or reject its recommendations because it is independent, and it is an ongoing debate, but the hon. Gentleman, absolutely and clearly—I shall take Hansard out to lunch if necessary—supported the recommendations. I congratulate him on the first spending commitment given by the Opposition in this Parliament. I am sure that the self-employed intend to ensure that they stick to it.

James Clappison: I quoted at length the words of the Association of British Insurers on the question of what the Government have done. That would be a unique way of making policy, but I assure the Minister that the purpose of the amendment, as I tried to make clear—[Interruption.] It is an interesting way of answering a question to refuse to say anything about it and then to accuse the Opposition of having the temerity of asking questions.

Julian Brazier: Many Opposition Members, who are extremely fond of the Minister, feel profoundly relieved that my hon. Friend has managed to get him out of the unfamiliar consensual mode and back into party-political aggro.

Ian McCartney: I hate to see the hon. Member for Hertsmere so embarrassed. It was not my intention in congratulating him to cut short his career. We all know that we may from time to time declare things that we have not discussed with our leaders. We have all done it. The hon. Gentleman has two options. He can resign, or, between now and the Bill going before the House, he can clarify the matter—the latter would be easier than my having to buy Hansard a meal. There is no doubt that the hon. Gentleman gave a commitment. However much he wriggles, or looks at me with those big eyes, he gave a commitment.

James Clappison: The words in Hansard will speak for themselves. I give the Minister an undertaking, however, that if he finds the words that he claims are there, I will happily treat him to an extra lunch for his
 birthday, particularly as he is in such an expansive mood.
 The new clause raises the issue of pension provision for the self-employed to discover how they will fare under the Government's proposals for the state pension credit. It refers to preparing and setting a report before Parliament, but that would not cost a great deal, and no other expenditure is envisaged. It is, however, fair to ask what the implications of the proposals are and what has been said about them. 
 The right hon. Gentleman had a second line of attack, beyond accusing me of making a policy commitment that I did not make. I apprehended his attempt, which was great fun, and nice while it lasted. His other line, however, was to ask what the Conservatives had done for the self-employed, but I should gently remind him of what his colleagues have done for them. When the Conservatives left office, national insurance contributions for the self-employed were much lower than they are today. As a result of this Government's 1998 announcement, which took effect in 2000, the rate on profits for the self-employed increased, and the upper and lower profit limits were extended. As a result, someone who earned £30,000 a year—

Peter Atkinson: Order. The hon. Gentleman is talking about contributions, but, as I understand it, the new clause is about benefits.

James Clappison: Indeed, but we must briefly examine contributions to see that the Government jacked them up by £300 in a single year.
 We asked the Minister about the position of the self-employed under the state pension credit, and his response took matters a little beyond what we knew at the beginning of the debate. This is an important question, and I, too, shall read Hansard carefully—to see whether the Minister offered the self-employed anything other than bogus debating points. 
 Like employed people, the self-employed will face whacking increases in their national insurance contributions this year, on top of whacking increases in previous years. In the new clause, we ask how they will fare under the state pension credit. We will read the Minister's remarks carefully and reflect on the issue. However, for today's purposes, and to make progress, I beg to ask leave to withdraw the motion. 
 Motion, and clause, by leave withdrawn.

New clause 8 - Income from capital

'.—The Secretary of State shall, at intervals not exceeding five years, invite the Social Security Advisory Committee to appraise whether the definition of income from capital under this Act remains appropriate and to make recommendations for any change in the formula or coverage of relevant regulations providing an implied income from such capital.'.—[Mr. Boswell.]
 Brought up, and read the First time.

Tim Boswell: I beg to move, That the clause be read a Second time.
 The Committee will feel much better for that lively debate. I am conscious of the passage of time and that 
 this is the last substantive new clause that has been selected for debate. In a way, it brings us back to technical considerations, but it also has important wider policy implications. 
 I am always astonished at my own moderation and at my ability to give.

Julian Brazier: Hear, hear.

Tim Boswell: I am concerned that my Whip feels that I am unduly modest. I will move into attack mode—it might be safer.
 I tend not to use extravagant language, except possibly in the confines of my home, so I shall have to use an agent. In this case, my agent is Mervyn Kohler, who is known to many of us as the public affairs director of Help the Aged. In commenting on the treatment of capital in clause 15, he lets drive, saying: 
''The prescribed rate should be on the face of the Bill, and expressed as a number in relation to the rate set by the Monetary Policy Committee of the Bank of England, perhaps calculated as a six-month average. It is iniquitous to assume a 10 per cent. return on capital and to leave this as a matter for regulation (not even requiring the positive affirmation process described in 19(2)''.
 Those familiar with the Bill will know clause 19 as the regulations clause. Mr. Kohler bitterly attacks the concept and operation of clause 15, which we have already discussed, and to which I shall not return. However, he is right to express concern about it. Of course, we are not beholden to anyone and we will make our own judgment about how to present our concerns. 
 I shall deal first with the assessment period. The assessment period is set at five years, and the suggestion is that there should be a review every five years. That is no accident. Every five years, the sort of period during which a normal case would not be varied in relation to pension credit, there should be a fresh look at how the capital formula is determined or transmuted into income. That builds on the idea of Help the Aged. The really meritorious part of the comments of Help the Aged, apart from its attack on the Government, was the suggestion that there should be some objective test or process by which the process of taking notional capital and converting it into income should be carried out. It suggested a link to the Monetary Policy Committee rate, so that one could read off an implied capital rate. In my proposal, I want to leave slightly more discretion for Ministers, but the principle touched on by Help the Aged is important. We need an independent body that we can run such issues past. We have an admirable example, in doctrine and in practice, in the Social Security Advisory Committee. 
 The new clause proposes that, every five years—that is consistent with the assessment period—the Secretary of State should invite that advisory committee to see whether the definition of income under the Act remains appropriate and to make recommendations for any change in the formula for implied income. That is a modest and reasonable proposal. We have already said that there are concerns about treating capital as income. However, Ministers have made the point that it is much easier if it is treated in that way, because capital is easier to capture than income flows, which may vary, and we certainly 
 do not want a situation in which persons who find that their income is diminishing cannot benefit from changes in their assessment. There may be cases in which capital increases and we have to ask whether income follows that, and whether their high notional assessment is actually fair. I pass over the matter that the working tax credit, as introduced in the Budget, will do away with the test of implied income altogether, so there is now inconsistency between the various tax credits. 
 I suppose that the biggest concern, which is clear from the comments of Help the Aged and other pensioner organisations, is that the Government will set a 10 per cent. notional rate of return on capital in excess of £6,000, as they have suggested. That is a bit steep to put it mildly, even in present circumstances.

Maria Eagle: If the hon. Gentleman thinks that is steep, would he like to make an alternative suggestion?

Tim Boswell: If I were to make an alternative suggestion, the Minister of State would immediately say that I had made a policy pronouncement. With greatest respect to the Under-Secretary, charming as she is, it is for Ministers to decide the figure. I do not want to make a suggestion; I want the Social Security Advisory Committee to make suggestions. It can do that independently, without my figures or the Minister's.
 Ministers have pointed out that 85 per cent. of pensioners are below that starting point of £6,000 capital. That may change over time, which is also relevant to our proposal in the new clause. They also said, when we debated clause 15, that the implied average rate of return on capital as pensioner income is attenuated by the bottom tranche. If it is zero on the bottom £6,000, the average rate is reduced, and there is no point in arguing with that. However, while that may be true of the average rate, it is not true of the marginal rate of return, which is expected to be 10 per cent. I challenge the Minister to find me a reliable security on which I can have a reliable return of 10 per cent. on capital at the moment. In the present circumstances of a low-inflation economy, it would be necessary to look for a special set of circumstances such as a person of advanced age—over 75—who bought an annuity. Because a high loading is put on the possession of capital, there is an implied suggestion that pensioners should dis-save or annuitise their existing capital assets, which might not be a good idea. People working for our team have done some exemplifications on the figures, and it is difficult to understand how a pensioner can possibly receive as much income as under the 10 per cent. formula set out by the Minister. 
 I do not want to belabour the point, but we understand that the Government—and especially the Chancellor—want a degree of stability. I quoted the Prime Minister with approbation this morning, so I shall be kind to the Chancellor this afternoon to preserve balance. However much the Government want stability and feel that they have achieved it in 
 relation to monetary policy, which my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) has essentially approved, major changes could take place quite suddenly in inflation or interest rates, for example. Such changes would affect the returns on capital. 
 We should also consider the relationship between capital generally, or particular kinds of capital, and the interest determined from it. The notes from Help the Aged express concern about the long-term valuation of real property. Many buy property as their pension fund—by buying to let, for example. Especially in London and the south-east, that property might have a high and escalating capital value but give a relatively low income when expenses are taken into account. A circumstance may arise in which a property that was tenanted suddenly falls into vacant possession and the capital value shoots up because the premium falls to the landlord, but the property produces no income at all until it is sold. 
 Let us consider another example. If changes were made in other benefits, such as council tax or housing benefit, the capital rules or coverage might be different and it would seem inequitable to have two sets of regulations subsisting at the same time. Until recently, for example, the rules on quantity have varied in relation to the distinction between pensioner and disability benefits. 
 In addition, as a matter of public policy, it may be necessary to consider whether a measure is working out fairly. A capital assessment may appear wrong, or it may become difficult to make a reliable capital assessment—on an overseas asset, for example. What happens if an asset is in a devalued currency? Will that automatically affect the assessment? 
 Finally, some important issues of policy might arise. We might decide to remove certain kinds of capital holdings from the system altogether. I refer, for example, to the compensation payments in which the hon. Member for Bassetlaw (John Mann) expressed interest. 
 None of that is intended as a policy recommendation, so there is no need to get excited about that idea. That is not to say that it is impossible to derive an implied income from capital. The new clause would mean that for a period of time, which for convenience we suggest should be consistent with the maximum assessment period in the Bill, the Social Security Advisory Committee should examine the matter and any representations that it might have received, reach an objective view and make a recommendation to Ministers. It would always remain Ministers' responsibility to receive that advice, deliberate on it and to make a decision. 
 The new clause would introduce into this part of the world, as the Monetary Policy Committee introduced into the setting of interest rates, a degree of objectivity and independent appraisal. That is why the new clause has considerable merit. I hope that the Minister can see that it is tendered in a non-partisan way and is designed to help make the system work better and more fairly for pensioners.

Steve Webb: As it is the Minister of State's birthday, I propose to applaud the Government. I shall try not to make a habit of this, but in 1988, when the rules on the conversion of capital into income were introduced in their present form, an implied interest rate of not 10 but 20 per cent. was introduced. It applied not from £6,000 but from £3,000. In 1988, capital rules were applied for the first time to housing benefit, which affected many pensioners, the group about which we have been talking for the past few weeks.
 Between 1988 and 1997, the then Conservative Administration did nothing about that. They left the £3,000 threshold at that level for nine years thereby eroding its real value and bringing many more pensioners into penal rates of 20 per cent. After 1997, the Conservative party decided that it wanted to sound like it was on the side of pensioners and savers, and it started attacking that regime. The hon. Member for Havant started to say that the imputed rate was too high and that there should not be a cap on the top. We had made that point somewhat earlier, but we welcomed his conversion. 
 The Government have done that. They have taken the cap off at the top, which means that there is no upper limit, and they have halved the imputed rate. They considered looking at actual savings income, but on reflection that would have been quite messy and the pensions groups did not want it. We have a situation in which most pensioners with savings are not in the system and there is some flexibility whereby rates can be changed if interest rates change. Indeed, we would want some flexibility in the regulation. I do not agree that we need a figure, or necessarily a formula, in the Bill. 
 I have no particular problem with new clause 8 and the idea that the SSAC should look at the matter. However, my suspicion is that if we let it do that and it does so every five years, which I do not have any problem with, it might well say that what we have is a darn sight better than what we used to have. 
 On 10 per cent. rates, the hon. Member for Daventry admitted that that is 10 per cent. on the margin beyond £6,000. Someone with £6,500 is only going to be imputed to have a tiny amount of savings income. The average rate on that is well below that of a long-deposit building society account. For once, we should stand up and say that we have been banging on about that for years, it was not addressed for almost a decade, but it has finally been addressed. Of course, we would all have liked it to have gone further, but it seems to me to be an enormous step in the right direction. 
 The only question is if the rate of imputation beyond £6,000 is quite high, on very low quantities of capital that is a very low average rate, but on high quantities of capital it is a high imputed rate above that that one might reasonably attain. That kind of loading is probably what we want in the sense that the system was initially a safety net. We do not want to catch small savers in it, but we probably do not want to hand out means-tested benefits to somebody with a socking great amount of savings. The SSAC may look at hard cases, of the sort that the hon. Member for Daventry legitimately raised, through that sort of 
 mechanism. I do not object to that, but they will be extreme cases. In the majority of cases, the Government have moved in entirely the right direction and we should applaud them for doing so.

Andrew Selous: I want to make two points. First, I want to point out that the contradiction in what the hon. Member for Northavon said is that for those pensioners who are lucky enough to have savings over £12,000 it is actually a move in the reverse direction. If the interest rate is halved and the limit is doubled, all those with more that £12,000 are worse off. Although I appreciate that not many pensioners are fortunate enough to have savings of £12,000, they do comprise an increasing number of pensioners, particularly as people inherit money from the proceeds from their parents' houses, or as a result of compensation claims. That must be borne in mind; I do not think that it fits very well with the Government's declared intention to encourage savings. There has been a reversal for those lucky enough to have more than £12,000.
 The other brief point that I wanted to make is purely for the sake of simplicity, and the reduction of complexity. The limit on capital for local authority charges is £11,500. There would be merit in having one uniform limit for nursing home charges and pension credit. If the two could be moved together, pensioners would better understand them, and that would end confusion.

Maria Eagle: It is a pleasure to be under your Chairmanship again, Mr. Atkinson. The debate has been interesting. I have had a very strange afternoon because I find myself in almost total agreement with what the hon. Member for Northavon has just said, which is quite something. I thought that what he had to say effectively answered many points raised by the hon. Member for Daventry, in respect of his new clause.
 For the purpose of clarification, I want to tell the Committee what the effect of rate of return would be at various levels of capital savings. That will inform the debate because it is easy to forget about the disregard, and to make assumptions about the effect that that has on the notional rate of return. Of course, under £6,000 that is zero; between £6,000 and £8,000, the effective rate of return is zero to 2.6 per cent.; between £8,000 and £10,000 it is 2.6 to 4.2 per cent.; between £10,000 and £12,000 it is 4.2 to 5.2 per cent.; between £12,000 to £15,000 it is 5.2 per cent. to 6.3 per cent.; and between £15,000 to £20,000 it is 6.3 to 7.3 per cent. Only at £20,000 plus, does it reach 7.3 per cent., rising to 10 per cent. That is a vast improvement on the current situation. The hon. Member for Northavon kindly made that clear. 
 The substance of the new clause makes various references to the SSAC in respect of the notional rate of return. The hon. Member for Daventry suggests a mandatory reference every five years asking for recommendations. The Government have a high regard for the SSAC and for the advice that it gives. We do not follow its recommendation in every instance, as hon. Members will be well aware, but we do take seriously what it has to say, and consider its recommendations closely. We are happy to include pension credit in its remit. If the hon. Gentleman 
 examines schedule 2(20), on page 25, he will see that we have done so. On that basis, pension credit does come within the remit of the SSAC.

Tim Boswell: Is not the point of the new clause that it ties Ministers to referring the matter on a fixed timetable? Given the concerns from the hon. Member for Northavon about the performance of the previous Conservative Government, if such a timetable had been enacted under something similar to the new clause, the long gap that he did not like would have been run past the advisory committee, which would have made recommendations whether Ministers liked it or not.

Maria Eagle: The SSAC, as a result of the fact that the benefit will be included within its remit, will have the opportunity to comment on pension credit regulations after the usual period in any event. It will be free to look at any aspect of pension credits, as it sees fit. If the Government see a particular need for advice, it is open to the Secretary of State to invite the SSAC to look at any area of social security policy at any time. In that sense, the hon. Gentleman's new clause would, in effect, put an artificial timetable and process on any scrutiny that the SSAC might actually wish to carry out.
 The Government take seriously their duty to monitor the achievements of their social policy objectives. That is part of our day-to-day stewardship responsibility, as a Government. We would not want to turn our mind to it only once every five years in a mechanistic way.

Andrew Selous: The new clause refers to intervals ''not exceeding five years''. I think it is worth the Under-Secretary reflecting on that point.

Maria Eagle: Yes, but such phraseology tends to end up meaning quinquennial. At the moment, references can be made and the SSAC can itself seek information and look at the scheme if it wishes. In many ways, the new clause would put an artificial constraint on the relationship that is created by including pension credit in the SSAC's remit.
 I also point out that we shall specifically look at the capital limit annually, as part of the normal uprating process, as hon. Members would expect. Changes to the notional income from capital can be made by regulations. I agree with the hon. Member for Northavon that including figures in Bills can lead to inflexibility of the kind that one often sees in older social security legislation, which makes change difficult. 
 I think that there are mechanisms to examine, take independent advice on and make changes to our arrangements for notional capital. I have tried to look fairly at the new clause of the hon. Member for Daventry and have listened to what he has to say, but I genuinely think that his concerns are addressed by the arrangements already in the Bill. I hope that he might come to agree with me. The arrangements for notional income being made under the pension credit scheme are five times more generous than those under the minimum income guarantee. As the hon. Member for 
 Northavon has pointed out, they are significantly more generous than such arrangements have been. I hope that, in view of my assurances, the hon. Member for Daventry will consider not pressing his new clause to a vote, although he is perfectly entitled to do that should he so wish.

Tim Boswell: The Under-Secretary has consciously adopted a moderate tone in her response. I have been accused of introducing no new policies and incurring no new public expenditure, and I suppose that one should be grateful for such modest gains.
 The Under-Secretary pointed out that there are some procedures and safeguards in the Bill, so that the matter could be looked at. It is important that such assurances are drawn out in our debates. All that I am really saying is that things change over time, whether she or I like or anticipate those things or not. In the interests of fairness, it should be fairly common for the Social Security Advisory Committee, and others, to examine the consequences of the Bill in the area covered by the new clause. That area will need, and I hope will be susceptible to, change. 
 In deciding whether to press the clause to a vote, I have been thinking that what we have achieved here is a very important development. I have been rehearsing in my mind, since the speech of the hon. Member for Northavon, the sad saga of Sven and Ulrika, which has been occupying the popular prints for a long time. We thought that he was walking out with us, but now we have found that he has really gone back to his true love, supporting the Government. I make no disapprobatory comment, except to record the passing scene and say—[Interruption.] We are getting into very deep waters indeed. 
 The important point is that we have had a good and, to be honest, a good-natured exchange of views on a key matter. I beg to ask leave to withdraw the motion. 
 Motion and clause, by leave, withdrawn.

Schedule 1 - Administration

Tim Boswell: I beg to move amendment No. 40, in page 15, line 26, at end insert 'foreseeable'.
 The genesis of the amendment is that, rather like a dog with a lamppost, I treat it as professional deformation to leave schedules unamended. It is necessary to warn Ministers that something should be said about them. When I introduced schedules as a Minister, I always had my fingers firmly crossed and hoped to goodness that I knew what was not right with them. I mention that as a semi-jocular point, because this schedule relates to administration, and that, rather than the essence of the Bill, is the proper subject of a schedule. The schedule reflects a considerable body of doctrine and experience in the social security system, so the amendment is not an attempt to get at the Department by a side wind. 
 However, I am glad that I chose the amendment as the Committee begins to draw to a conclusion because, although I missed some debates on Tuesday because 
 the Minister and I were debating elsewhere, I have looked at the record and I am concerned that some points were not brought out as clearly as they might have been. The amendment suggests the insertion of one word, and addresses what is and is not reasonable for a pension credit claimant to have to lay on the table, and what a decision maker should have to consider when determining an assessment period. 
 We all anticipate that most pension credit claimants will act in good faith, that they will be straightforward and declare their income as best they understand it, and that they will expect to be treated on that basis. The system will become intolerable if people go around inventing potential circumstances under which additional income may accrue. I understand that we are talking about only the assessment period, which can be revised, rather than about a determination that must run for five years, but I am anxious to explore what is or is not a likelihood. 
 Future changes in income could very well be predictable. For example, a pensioner could have an annuity—dare I say, a pension annuity, to refer to the new concept in clause 16—which may include an income-related escalator clause. It could be sensible to have such an inflation clause, which would keep the claimant as well off in real terms as they were at the point at which the annuity was taken out. If that were the case, it would be as easy for a decision maker to calculate the impact of inflation as it would be for the state benefit system to work out how much pensions should be uprated annually to meet inflation. That is pre-mechanical procedure. 
 Other kinds of change could be less predictable. They could relate to dividends received from companies with which the claimant had shareholdings. Changes could be even more speculative and could—as we discussed the other day—relate to matters such as casual windfalls or irregular income, which could affect calculations. However, I do not suggest that Ministers seek to create an artificial or unfair situation, at least in this regard; they want to produce sensible rules for decision makers. 
 So, what is a decision maker allowed to consider, and what is a pension credit claimant reasonably expected to disclose? If there were to be income-related annuity, that would be a reasonable thing to declare because it would show the income flow forward. On other matters, it may be more difficult to make predictions. We all want to avoid a situation in which a decision maker brings extraneous material into a calculation or decides that there has to be a shorter assessment period, causing some irritation to the claimant. We also want to avoid a situation—this is my real concern—in which a claimant might have tried to act in perfectly good faith, and disclosed all the sources of income that he or she knew of, but might not have completely levelled with the decision maker, perhaps accidentally, on what was likely to happen to an increase in those incomes. 
 In such circumstances, the judgment would be difficult to make. We would have to try to separate the pensioner who acted in good faith but did not take everything into account, or who genuinely 
 underestimated future income flow, from the pensioner who was very happy to keep something hidden behind his or her back and had not been straightforward in filling in the form or in discussions with the Pension Service. 
 Although there are some difficult concepts there, we all want to achieve a system that is precise. When the tax authorities capture an actual income, for example, in relation to a year of assessment that has taken place, that is relatively manageable. However, when future income flows have to be estimated, as in a sense they do under the Bill, things become more speculative. We want the system to work fairly. I hope that, in responding, the Under-Secretary will understand that the amendment is essentially a probing one. It would be useful to have her assurances on it.

Maria Eagle: I am somewhat relieved that the hon. Gentleman has given me a hint on what his amendment is about. He has just referred to ''difficult concepts'', and I was looking at it last night, trying to get my head around what ''foreseeable'' likelihood was. I was not sure whether he would be in the mood for a deeply philosophical or epistemological inquiry when discussing the schedule, or whether he just wanted to probe exactly what ''likelihood'' means.
 I decided that I had better resort to a dictionary. The hon. Gentleman has told us something about the genesis of the amendment, and it was apparent once I had looked in the dictionary that that genesis was not there. I looked up ''foresee'', which should have been somewhere between ''forsake'' and ''forsooth'', but it was not. I did not get much help from ''Chambers English Dictionary'' or from the ''Oxford English Dictionary''. I resorted, as one does as an ex-lawyer, to a legal dictionary, and did not find the term in there either. 
 I then turned to ''likely'' and ''likelihood'', and got some succour from the legal dictionary about the meaning of likely, most of it from the Antipodes. There have been a lot of cases there about the meaning of likely, but general opinion seems to be that it means probable. I think that that is helpful. When we look in our own dictionaries, likely and likelihood are defined in terms of probability. The thesaurus included such terms as probable, possible, expected and to be expected. That is the kind of meaning that we are looking at, if that reassures the hon. Gentleman. 
 We are looking at something of a subjective test. We shall not be conducting some kind of Kafkaesque interrogation of the possible likely future with causal relationships having to be calculated at certain levels of probability. It is a commonsense test about what the claimant actually knows about a future of some uncertainty, a subjective test of his knowledge. The intention is not that the claimant must know of all changes in circumstances that are likely to occur, but that he should inform us of what he does know to be likely. We are not asking him to anticipate any strange change that might happen in certain unlikely circumstances and tell us about those in case it does. That would be a Kafkaesque world. It is a subjective test of what he knows is likely to happen. 
 As currently drafted, paragraph 3(3) would require a person to notify the Department of ''predictable'' changes in their circumstances. That means unsurprising, knowable changes. Any other interpretation would require speculation on the part of the claimant, which would clearly be unreasonable. We do not want to be unreasonable. Our decisions makers are by their nature reasonable, otherwise they will fall foul of the appeals process. By ''unreasonable'' I mean difficult or unfair. It is obvious that I had fun with my dictionary last night. I thought that I might as well look some words up while I had the books down from the Library shelves. 
 I hope that the hon. Gentleman will be reassured by what I have said. I am sorry not to have been able to find a definition of ''foresee'', but given that it was not there and given that he has explained to the Committee that it was a probing amendment in respect of reasonableness and the subjectiveness of the test, perhaps I can finish by saying, forsooth, I hope he will forsake his amendment.

Tim Boswell: At least in that respect I am ''Reassured of Daventry''. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn.

Peter Atkinson: I am grateful to the hon. Gentleman. I do not know what would have happened to the status of the amendment when the word did not appear in the dictionary and had no legal meaning.
 Schedule 1 agreed to.

Schedule 2 - Minor and consequential amendments

Steve Webb: I beg to move amendment No. 39, in page 26, line 5, at end insert—
'National Assistance Act 1948 
 24A In section 22(4) of the National Assistance Act 1948 (charges to be made for accommodation), at end insert ''and an amount of savings credit under the State Pension Credit Act 2002 to be prescribed in regulations''.'.
 I see that we have the remainder of today and all of Tuesday to discuss this amendment.

Maria Eagle: Talk slowly.

Peter Atkinson: Oh no.

Steve Webb: The amendment would answer a simple question: what is the position of pension credit recipients in residential and nursing homes with regard to the savings credit? We may have got the wrong bit of the wrong Act. The Government claim that the Bill will make savings pay, yet we have already thought of a number of instances—for example, for women aged 60 to 64—where savings will not pay. I received a written answer the other day, which stated that 200,000 recipients of pension credit will be living in residential care or nursing homes. I presume that that includes those people who are there on income support and getting all their fees paid. As I understand it, they will get what would colloquially be called pocket money, although that may be slightly
 pejorative. They get an expenses allowance of about £15 a week.
 I have raised that issue in the House. An issue of dignity is involved if people get £15 a week for pocket money in their declining years. As the pension credit comes along, should people who have saved and are now living in residential or nursing care have every penny of saving credit taken off them too, and just be left with the pocket money? Or should we simply say, as the amendment does, that those who have saved will receive a reward even if they are living in a residential or nursing home, because in addition to the pocket money they will get some savings credit? Two people in a residential home could both be getting the pocket money when one has saved and the other has not. If the Government want to reward savings, should not the credit apply just as much to people in residential accommodation?

Maria Eagle: The hon. Gentleman has raised a point that has come up in other parts of the Bill. It is obviously important. The amendment is a probing one but it has some faults in the sense that if it were implemented as it stands, it could have perverse effects. I therefore cannot tell him that we love his amendment. It would place an obligation on the Department to ring-fence at least part of the savings credit from the financial assessments undertaken by local authorities when determining an individual' s ability to pay for their residential care.
 Local authorities' assessment of the amount that people can pay towards their care costs is a matter for them operating within the Department of Health's guidance. It is not an area of policy for which Ministers in my Department are responsible, which is why it does not appear in the Bill. When Baroness Hollis was asked about this in another place, she reminded the other House that it was a matter for the Department of Health, which indeed it is. 
 I want to advise the hon. Member for Northavon of the effect of his amendment on individuals and illustrate that it is not so simple to carry it out and ignore the savings credit in the assessment. Random effects would be created. The local authority means test reduces a person' s income—the hon. Gentleman referred to it as pocket money, but many elderly people find that an offensive way of putting it—to £16.80 a week. If the savings credit were to be paid on top, as the amendment suggests, a person with £100 income before the local authority applied the means test would be left with £30.60 after the income assessment. That is because they would be entitled to the maximum savings credit of £13.80 on top of the £16.80 allowed under the local authority means test. 
 However, a person with £115 original income who was entitled to a savings credit of £7.80, would be left with just £24.60—£16.80 plus £7.80—so some illogical and arbitrary payments would arise. That is why the Department of Health is still considering how best to deal with guidance in respect of the pension credit and its impact. We intend, however, that pensioners in residential care homes will be treated in the same way as other pensioners. The Department of Health is 
 looking at the detail. I cannot tell the hon. Gentleman how far it has got with solving this problem, but that is the position. I hope that that reassures the hon. Gentleman that we intend to ensure that everyone benefits and that he will not press the amendment, but he may feel inclined to do so.

Steve Webb: I am somewhat heartened by the Minister's response. I hesitate to nit-pick, but the anomaly whereby someone with fewer savings ends up with fewer savings credit than someone with more savings is precisely the same anomaly outside residential care as inside it. It is not anomalous at all; it is the point of the scheme, so it is not a fundamental obstacle. If I have understood the hon. Lady correctly, the Department of Health will attempt to ensure that the goal of savings credit in rewarding those who saved will also apply to people in residential care, so it will not all be swiped away.

Tim Boswell: Let me enter a boring, though necessary, reservation. If that is to happen, the detail of financing and the implications for charges and local authorities will have to be examined carefully.

Steve Webb: I am sure that, as the hon. Gentleman says, all the intricacies will have to be examined, but I am greatly encouraged by the Minister's response. A propos the hon. Gentleman's likening me to Sven-Göran Eriksson rather than Ulrika Jonsson, I may be forced to forgo the pleasantries that normally conclude our proceedings because I have been summoned to 10 Downing street. I hope that the Committee will forgive me and not think me rude for that. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Schedule 2 agreed to. 
 Schedule 3 agreed to. 
 Question proposed, That the Chairman do report the Bill, as amended, to the House.

Ian McCartney: As part of the normalities of ending Committees, I shall be brief and I know that the hon. Member for Daventry will do the same. I do not want to detain our colleagues too long, but it is important that I make a number of points. The Committee does not simply do its work and go away again. A lot of effort is put in by many people behind the scenes, to whom I pay tribute.
 You and I, Mr. Atkinson, have been rattling around the House and this Corridor for some considerable years. Indeed, in recent years, you have chaired virtually all those occasions when I have been dealing with the legislative programme as a Minister, and you have kept me on the straight and narrow. I am also grateful to your colleague, Mr. Griffiths. I hope that he will survive the consequences of chairing the Committee. 
 The hon. Member for Daventry and I have a similar relationship. I do not know why, but every time there is a reshuffle in the Government or the Opposition, we telephone each other to check whether colleagues are still around. For a short period, the two of us were broken apart and became broken-hearted: when I had to go to the Cabinet Office, the hon. Gentleman was not allowed to follow me. However, we have been put 
 together again, and I look forward to more discussions with him over many years. 
 On behalf of us all, I thank the Clerk and the Hansard writers. I particularly thank the Clerk for the assistance and advice that he gives hon. Members. Without that, the Committee could not operate effectively. 
 I thank my hon. Friends for their support. A number of them have worked on Bills with me before, but for others, it is their first time. Indeed, some of my hon. Friends are in the House for the first time, having worked in other places, including Downing street and the Labour party. They used to write my speeches; now they have to sit and listen to them, so I thank them. 
 That reminds me of a comment made way back in the dark years about the Labour party national executive. ''What is this committee?'', it was asked. Someone replied, ''It is a group of the unwilling, picked from the unfit, to do the unnecessary.'' I hope that that is not how people perceive this Committee. I hope that we have been fit for the purpose and have done what is necessary for pensioners. 
 I say to Opposition Members that the whole point of parliamentary democracy is to have accountable Governments and to enable Oppositions to hold them to account. I usually give awards on these occasions, and the award for the best Government reply on the Bill goes to the hon. Member for Northavon, who beat both me and my hon. Friend the Under-Secretary with the reply that he gave this afternoon. I have to give the award for the best Opposition speech to the hon. Member for Hertsmere for getting out of the first commitment given by the Opposition. Whatever happens in the rest of his career, he will always have the McCartney award. 
 This is the first Bill on which the Under-Secretary has worked with me, and I hope that it will not be the last. She has the passion of a politician, but also the guile and savvy of a lawyer. With those characteristics, she could end up as leader of the Labour party, but we shall pass over that. 
 I thank my Parliamentary Private Secretary, my hon. Friend the Member for Wigan (Mr. Turner), and my hon. Friend the Member for Basildon (Angela Smith). I could not have expected more from them. I also thank parliamentary counsel, all the officials, the government and parliamentary relations unit and my Bill team. We have not quite finished our activity, but I hope that their work will be well rewarded. 
 This is one of our flagship Bills. It is critical to the Government and to our relationship with older people. I look forward to the challenges ahead on the Floor of the House and, more important, to the real work that begins when the Bill leaves the House. That will ensure that the measure is implemented effectively and we get the pension credit to those 5.1 million pensioners in the way that we have described. 
 I finish by saying that I am sometimes rather dubious about the press and would therefore like to hear the Committee's view on something that was written about me last Tuesday. I always like to hear 
 the views of my parliamentary colleagues. That edition of The Times says that the shadow Secretary of State for Work and Pensions 
''can surely never have come across anything quite so alien . . . as Ian McCartney, the Minister of State for Pensions.
Mr. McCartney is a Scottish former seaman and chef, pugnacious, entirely round''
 and—I paraphrase—so short that even when he stands at the Dispatch Box he sometimes cannot be seen. The article continues: 
''Mr. McCartney has a unique rhetorical style, a Tsunami''—
 I thought a tsunami was one of those big, fat guys from Japan.

Maria Eagle: It is a wave.

Ian McCartney: I know. I looked it up in the dictionary. The piece continues:
''His native tongue is triple Dutch . . . foaming and unstoppable, he brings Hansard writers out in a muck sweat.''
 I ask you, can you believe a word that the Conservative press say? 
 Colleagues, thank you for everything. It is unique day, as the Committee stage is finishing on my birthday. I look forward to our debate in a few weeks' time to finish the Bill. I thank you, Mr. Atkinson, and your fellow Chair very much for the wonderful way in which you have chaired the Committee.

Tim Boswell: First, I want to speak about our lost love, the hon. Member for Northavon. We all understand why he had to leave the Committee, but he would have wanted to join in these sentiments and pleasantries, which are one of the nicest parts of parliamentary procedure. I am happy to join my hon. Friends and other associates on the Opposition Benches in supporting the Minister's kind remarks. We are grateful to you, Mr. Atkinson, and to your co-Chairman, Mr. Griffiths, for looking after our proceedings. They were less fraught than some, and certainly less extended, but no less fruitful for that.
 We thank the supporting staff—the Clerk for the advice we have had, and the assistance of the Hansard writers—who are so important. There is an interesting, albeit indirect and oblique, relationship with those on the Bill team assisting the Minister, who seek to iron out the wrinkles, as we hope that they will. We also thank the police, the press, and those who briefed us. 
 These occasions are always pleasant, especially when the Minister is the right hon. Gentleman, and he has taken time on his birthday to be present. He can now go and enjoy the rest of the day. 
 I have been casting around for a suitable analogy for the Government, and as there is a fairly strong military component on the Opposition Benches, I will say that I admire immensely the military discipline of my hon. Friends who made their points with precision and efficacy where they caused maximum difficulty for the Government. 
 I also admire the naval traditions on the Government Benches. Those on the Back Benches appear to be in the submarine service and only occasionally break cover and hoist their periscope, but have generally done so with perspicacity and to good effect. They have done well. 
 Then there is the new frigate, launched on the Mersey only recently: the Under-Secretary, the hon. Member for Liverpool, Garston (Maria Eagle). She showed that she is a fast mover who can keep up with the convoy; in no sense did she fail to honour her position on the Committee.

James Clappison: Now tell us who is the Titanic.

Tim Boswell: Then we come to the Minister of State. I am ashamed to say that my hon. Friend the Member for Hertsmere—I owe him much thanks for his ability to explain things, and, above all, to avoid any commitments on spending or anything else—likens the Minister to the Titanic, but he is wrong. The Minister is much more like a pocket battleship; he carries heavy firepower in the shape of his eight grandchildren and in that respect I am sadly outgunned, as I have only one. Therefore, I might appear to be running away from a fight. However, we should remember what happens to pocket battleships in warfare. Sometimes, a group of lightly armed cruisers work together to hole them and do severe damage.
 I say that in good spirit, because this has been a most enjoyable Committee. If a Committee can enjoy a state pensions credit Bill, its members must be a remarkably agreeable and farsighted set of people. I agree with the Minister that there are important aspects of substance in the Bill. Points made by hon. Members in our debates may eventually bear fruit in the regulations and in the administration of the Pension Service. We all have constituents who are pensioners. We know their difficulties and worries, and how important they are to our communities. We want to do the right thing by them. We may not always have agreed, but we have had some valuable exchanges and developed a better understanding and a common commitment. That is why this has been such an agreeable Committee.

Peter Atkinson: I thank the Minister of State and hon. Members for their kind words. On behalf of my co-Chairman, the hon. Member for Bridgend (Mr. Griffiths), may I say that it has been a pleasure to chair the Committee, which has been good natured and constructive. It has been as good an example of a constructive Committee as one could have hoped to find. The Bill is complex, extensive and important, and has been dealt with expediently, efficiently, and with clarity and good humour. I am impressed by the Minister's and the Opposition's command of a detailed and difficult subject.
 Bill, as amended, to be reported. 
 Committee rose at fifteen minutes past Four o'clock.